Friday, September 15, 2017

District Revitalization Versus Stabilization

By Alex Pearlstein, Vice President

Imagine you had a job where the more successful you were, the more you were criticized. If you accomplished your assigned mission and had the metrics to prove it, but suddenly the rules of the game changed in midstream. Such is the fate of the local economic developer charged with revitalizing underinvested commercial districts. The more success he or she has, the greater the likelihood of a backlash under the guise of the “g” word: gentrification – a process as old as cities themselves. No less a source than The Onion has satirized on this trend. In the article “Decaying City Just Wants to Skip to Part Where It Gets Revitalized Restaurant Scene,” pretend residents wanted “the city’s accelerated revitalization process to then stop just before they are priced out of their current apartments.”

There is no way in the course of one blog to fully summarize or address the thousands of column inches dedicated to the “g” word issue, especially as there has yet to be a definitive study as to its real effects. However, as housing affordability challenges have come to the fore in destination communities and mid-priced cities alike, there must be an honest conversation in the economic/community development world about the long-term goals of urban revitalization. This is especially true as cities like Detroit and Birmingham (where I now live) are seeing a backlash against reinvestment in high-profile districts. These are cities that have spent billions of dollars trying to catalyze this self-same revitalization.

In Birmingham, the same city government that funded the new and renovated parks and minor league baseball stadium that spurred reinvestment is now empaneling (without supportive data) an “anti-displacement” task force. The reality in Birmingham – like in Detroit – is that only a very small fraction of the city is seeing reinvestment. Well over 90 percent of these communities is still suffering from high poverty and crime rates, underperforming schools, vacancies and blight, and widespread depopulation.

At the core of the debate over urban reinvestment is the question of who benefits: existing residents or those who start new businesses, work at those businesses, and become new residents. Because history has shown that these two groups are typically not the same. I have yet to see a district “Brookyn-ization” that has successfully navigated this issue; if a case study exists, I’m not aware of it.

In fact, cities churn; they just do. Neighborhoods rise and fall, residents and businesses move out and others move in; that’s just the effect of the free market. As such, what I’m referring to in this post is government’s role in the revitalization process. You can retroactively try to engender affordability, as a local researcher just described for Atlanta, or proactively implement measures favoring existing residents.

The conundrum becomes, do you presuppose that reinvestment will occur (even in places that have not seen revitalization for decades) and build in anti-displacement policies on the front end or wait until reinvestment occurs and reactively implement resident protections? The challenge becomes that preemptive anti-displacement policies increase the cost of investing in neighborhoods that may not have any appeal for private dollars (hence the need for revitalization incentives). And pro-affordability measures require a tremendous public outlay in an era of ever-diminishing budgets. This is why I find the whole issue so frustrating; cities are forced to simultaneously catalyze investment and prevent against its impacts.

I think a more logical process is to differentiate between neighborhood REVITALIZATION and STABILIZATION and implement policies accordingly. In essence, these are “place” versus “people” strategies. For the sake of argument, let’s say revitalization leads to greater neighborhood desirability and higher housing costs and that current residents are at a disadvantage to benefit from these changes because they have 1) lower incomes and 2) a less robust skill set for higher-wage jobs that would raise their incomes. In this scenario, enabling existing residents to capture the benefits of their revitalizing neighborhood without implementing anti-displacement policies requires upskilling them for more lucrative employment. In some cases, this is a GENERATIONAL process; the lifecycle of a commercial district exists in months and years.

So I propose that governments assess – somewhat akin to a zoning process – what commercial districts and adjacent neighborhoods warrant the revitalization versus the stabilization designation. Revitalization zones would implement place-based strategies such as destination amenity development, investment tax credits, forgivable small business loans, streetscaping and other aesthetic improvements, and additional tactics that have demonstrated results in spurring reinvestment. Property values and taxes, rents, and other market-driven metrics will not be mitigated and district revitalization will be allowed to proceed unhindered. While displacement may occur, the tax-base enhancements, destination appeal, and talent attraction benefits of the district will not be challenged.

Stabilization zones will receive more nuanced attention consistent with holistic programs such as HUD’s Choice Neighborhoods initiative, which is “designed to catalyze critical improvements in neighborhood assets, including vacant property, housing, services and schools.” Efforts will focus less on attraction of outside investment and more on uplifting the prospects of existing district residents.

Whether or not the revitalization vs. stabilization designation is politically palatable would remain to be seen. It might be more viable in some communities rather than others. But absent major innovations in reinvestment policy or workforce training, I don’t see a diminishing of the “g” word’s divisive impacts on urban areas and economies.